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Wednesday, September 18, 2013

Statement at the Conclusion of an IMF Mission to Senegal (6th Review of the PSI)

Press Release No. 13/348 -- September 18, 2013

An International Monetary Fund (IMF) mission led by Hervé Joly visited Senegal during September 4 - September 17, 2013 to conduct the sixth review under the three-year Policy Support Instrument (PSI) approved in December 2010. The members of the mission met with the President of the Republic, the ministers of economy and finance, budget, and energy; the Speaker and members of the national assembly; representatives of the Central Bank of West African States (BCEAO); other senior government officials; and representatives of the private sector, civil society, and the development partners.

At the conclusion of the visit, the mission issued the following statement:

“Recent macroeconomic developments were broadly in line with program projections. Infra-annual activity indicators put GDP growth at around 4 percent in 2013, up from 3.5 percent in 2012. Inflation has been very moderate so far in 2013, with consumer prices increasing by less than 1 percent year-on-year. The rapid uptick in exports coupled with a more modest increase in imports resulted in a slight reduction in the trade deficit.

“The less unfavorable international environment, improvements in the socio-political situation in the region, and good rainfall thus far all augur well for stronger GDP growth, which is expected to tick up to 4.6 percent in 2014. Infrastructure investments and mining activity are also expected to fuel growth, while inflation is expected to remain modest at around 2 percent.

“Program implementation continued, albeit more slowly than expected. All quantitative assessment criteria and indicative targets for the program at mid-2013 were met, including the budget deficit target, despite significant revenue shortfalls. Further, the power sector continues to post sizeable shortfalls, constraining the government’s ability to finance priority spending that is conducive to stronger, sustained, and job-creating growth. However, the implementation of reforms has lagged behind in recent months and a number of structural benchmarks remain unmet.

“Discussions between the authorities and the mission focused on the fiscal outlook for 2013 and 2014 and on accelerating the pace of reform, which is one of the main priorities of the new government. Tax revenue shortfalls in recent months have adversely affected the fiscal outlook. The slower pace of reform, in the energy and government sectors for instance, has also resulted in increased spending pressures for 2014 and over the medium-term. These developments make it more difficult for the authorities to achieve their objective of reducing the deficit to 4.6 percent of GDP in 2014 and also affect the composition and efficiency of government spending. In that context, the mission reiterated its concerns regarding the situation in the energy sector, which is exacting a heavy toll on public finances (more than 2 percent of GDP a year) thus restricting competitiveness and economic growth.

“At the request of the Senegalese authorities, the discussions on the sixth review of the PSI will be continued in the coming weeks so as to allow the incoming government time to set out its new priorities. In that regard, the mission would like to thank the new authorities very sincerely for so readily engaging in discussions immediately after taking up office.”